Wednesday, August 01, 2012

Recent UCL "unfair" prong decision: Wilson v. Hynek

In Wilson v. Hynek, ___ Cal.App.4th ___ (Jun. 20, 2012; pub. ord. Jul. 16, 2012), the Court of Appeal (Fourth Appellate District, Division One) applied the post-Cel-Tech formulation of the "unfair" prong, and held that the trial court had properly sustained the defendant's demurrer to the UCL claim without leave to amend:

The Wilsons do not assert on appeal that any of the defendants' actions were "unlawful" or "fraudulent." Rather, the sole basis for their assertion they have adequately pled such a cause of action under section 17200 is that the defendants' actions were "unfair." This contention is unavailing.

"Determination of whether a business practice or act is 'unfair' within the meaning of [section 17200] entails examination of the impact of the practice or act on its victim, '" ... balanced against the reasons, justifications and motives of the alleged wrongdoer. In brief, the court must weigh the utility of the defendant's conduct against the gravity of the harm to the alleged victim ...." [Citation.]' [Citation.] In general the 'unfairness' prong 'has been used to enjoin deceptive or sharp practices ....'" (Klein v. Earth Elements, Inc. (1997) 59 Cal.App.4th 965, 969-970.)

There is a split of authority in California as to the proper definition of "unfair." The Wilsons assert the proper test for the unfairness prong is whether the practice "'offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.'" (State Farm Fire & Casualty Co. v. Superior Court, supra, 45 Cal.App.4th at p. 1104.)

However, this court has, on three occasions, rejected that test and has applied a much narrower test, the so-called "Cel-Tech test" for establishing unfairness. (See Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1366; Scripps Clinic v. Superior Court (2003) 108 Cal.App.4th 917, 940; Byars v. SCME Mortgage Bankers, Inc. (2003) 109 Cal.App.4th 1134, 1147.) Under that test, a plaintiff must prove that the defendant's "conduct is tethered to an[] underlying constitutional, statutory or regulatory provision, or that it threatens an incipient violation of an antitrust law, or violates the policy or spirit of an antitrust law." (Durell, at p. 1366.)

In both their opening and reply briefs, the Wilsons ignore these cases. Moreover, they do not even attempt to show how their allegations in the second amended complaint can meet this test. Nor can they. As detailed, ante, their claims of alleged wrongdoing are directly contradicted by the terms of the deeds of trust, which they omitted as exhibits to their second amended complaint. Accordingly, the court did not err in sustaining the defendants' demurer to the section 17200 claim.